Vertex Customer Services India Pvt. Ltd., Gurgaon v. DCIT, New Delhi

ITA 1508/DEL/2015 | 2010-2011
Pronouncement Date: 28-11-2017 | Result: Partly Allowed

Appeal Details

RSA Number 150820114 RSA 2015
Assessee PAN AADCV7256M
Bench Delhi
Appeal Number ITA 1508/DEL/2015
Duration Of Justice 2 year(s) 8 month(s) 13 day(s)
Appellant Vertex Customer Services India Pvt. Ltd., Gurgaon
Respondent DCIT, New Delhi
Appeal Type Income Tax Appeal
Pronouncement Date 28-11-2017
Appeal Filed By Assessee
Tags No record found
Order Result Partly Allowed
Bench Allotted I2
Tribunal Order Date 28-11-2017
Date Of Final Hearing 28-06-2017
Next Hearing Date 28-06-2017
First Hearing Date 28-06-2017
Assessment Year 2010-2011
Appeal Filed On 16-03-2015
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL (DELHI BENCH I-2 : NEW DELHI) BEFORE SHRI N.K. SAINI ACCOUNTANT MEMBER AND SHRI KULDIP SINGH JUDICIAL MEMBER ITA NO.1508/DEL./2015 (ASSESSMENT YEAR : 2010-11) M/S. VERTEX CUSTOMER SERVICES VS. DCIT CIRCLE 28 (1) INDIA PRIVATE LIMITED NEW DELHI. (NOW MERGED WITH VERTEX CUSTOMER MANAGEMENT INDIA PRIVATE LTD.) 5 TH FLOOR TOWER A UNITECH CYBER PARK SECTOR 39 GURGAON 122 002 (HARYANA). (PAN : AADCV7256M) (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI NAGESHWAR RAO ADVOCATE REVENUE BY : SHRI H.K. CHOUDHARY CIT DR DATE OF HEARING : 12.10.2017 DATE OF ORDER : 28.11.2017 O R D E R PER KULDIP SINGH JUDICIAL MEMBER : THE APPELLANT M/S. VERTEX CUSTOMER SERVICES INDIA PRIVATE LIMITED (HEREINAFTER REFERRED TO AS THE TAXPAYER) BY FILING THE PRESENT APPEAL SOUGHT TO SET ASIDE THE IMPUGNED ORD ER DATED 30.01.2015 PASSED BY THE AO IN CONSONANCE WITH THE ORDERS PASSED BY THE LD. DRP/TPO UNDER SECTION 143 (3) REA D WITH SECTION ITA NO.1508/DEL/2015 2 144C OF THE INCOME-TAX ACT 1961 (FOR SHORT THE AC T) QUA THE ASSESSMENT YEAR 2010-11 ON THE GROUNDS INTER ALIA T HAT :- 1. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW THE ORDER OF ASSESSMENT FRAMED BY THE LEARNED DEPUTY COMMISSIONER OF INCOME-TAX CIRCLE - 26(1) NEW DELHI (HEREINAFTER REFERRED TO AS 'THE L EARNED AO') PURSUANT TO THE DIRECTIONS OF THE HON'BLE DISP UTE RESOLUTION PANEL - II (HEREINAFTER REFERRED TO AS ' THE HON'BLE DRP') UNDER SECTION 143(3) READ WITH SECTIO N 144C OF THE ACT IS A VITIATED ORDER HAVING BEEN PA SSED IN VIOLATION OF PRINCIPLES OF NATURAL JUSTICE AND I S OTHERWISE ARBITRARY AND IS THUS BAD IN LAW AND VOID AB- INITIO. 2. BASED ON THE FACTS AND CIRCUMSTANCES OF THE CASE THE LEARNED AO HAS ERRED IN COMPLETING THE ASSESSME NT ON THE NON-EXISTING AMALGAMATING ENTITY INSTEAD OF THE AMALGAMATED / SUCCESSOR COMPANY. HENCE THE ASSESSMENT ORDER PASSED UNDER SECTION 143(3) READ W ITH SECTION 144C OF THE ACT IS VOID AB-INITIO AND THE S AME IS LIABLE TO BE QUASHED. 3. THAT THE DIRECTIONS PASSED BY THE HON'BLE DRP ARE BAD IN LAW TO THE EXTENT THE SAME ARE PREJUDICI AL TO THE APPELLANT. 4. THAT THE LEARNED AOI LEARNED TRANSFER PRICING OFFICER ('TPO') HAS ERRED ON FACTS AND IN LAW IN MAKING THE TRANSFER PRICING ADJUSTMENT OF INR 124 940 966 IN RESPECT OF THE INTERNATIONAL TRANSAC TIONS RELATING TO THE PROVISION OF IT ENABLED SERVICES TO THE ASSOCIATED ENTERPRISES ('AES')UNDERTAKEN BY THE APPELLANT FOR THE PERIOD UNDER CONSIDERATION. 4.1. THE LEARNED AOI LEARNED TPO HAS GROSSLY ERRED ON FACTS BY CONSIDERING THE APPELLANT'S TOTAL COST BASE OF INR 528 494 432/- FOR DETERMINING THE ALP OF IMPUGNED TRANSACTION PERTAINING TO PROVISION OF IT ENABLED SERVICES AS AGAINST THE ACTUAL COST OF INR 490 265 727/- PERTAINING TO THE IT ENABLED SERVICES RENDERED BY THE APPELLANT TO /AES. ITA NO.1508/DEL/2015 3 4.2. WITHOUT PREJUDICE THE LEARNED TPO HAS GROSSLY ERRED ON FACTS BY NOT CONSIDERING THAT THE APPELLAN T'S MARGIN IS AT ARM'S LENGTH BASED ON APPLICATION OF INTERNAL TRANSACTIONAL NET MARGIN METHOD ('TNMM') METHOD. 4.3 THAT THE TPO ERRED ON FACTS AND IN LAW IN REJECTING DOCUMENTATION FILED BY THE APPELLANT IN T ERMS OF SECTION 920 OF THE ACT READ WITH RULE 100 OF THE INCOME-TAX RULES 1962 ('THE RULES') AND PROCEEDED TO MAKE A TRANSFER PRICING ADDITION BASED ON RE- DETERMINATION OF THE ARM'S LENGTH PRICE OF THE INTERNATIONAL TRANSACTION. 4.4. THAT THE LEARNED TPO ERRED ON FACTS AND IN LA W IN CHANGING THE FILTERS APPLIED BY THE APPELLANT FOR SELECTION OF THE APPROPRIATE COMPARABLE COMPANIES F OR DETERMINATION OF THE ARM'S LENGTH PRICE OF INTERNAT IONAL TRANSACTION USING THE TNMM AS THE MOST APPROPRIATE METHOD IN THE DOCUMENTATION MAINTAINED UNDER SECTIO N 92D OF THE ACT READ WITH RULE 10D OF THE RULES. 4.5. THAT THE LEARNED TPO ERRED ON FACTS AND IN L AW IN USING SINGLE YEAR FINANCIAL DATA (I.E. DATA FOR FY 2009-10 ONLY) AS AGAINST MULTIPLE YEAR FINANCIAL DA TA USED BY THE APPELLANT FOR DETERMINATION OF THE ARM' S LENGTH PRICE OF THE INTERNATIONAL TRANSACTION PERTA INING TO PROVISION OF IT ENABLED SERVICES. 4.6. THAT THE LEARNED TPO ERRED ON FACTS AND IN L AW IN REJECTING CERTAIN COMPANIES SELECTED AS COMPARAB LE ON THE GROUND THAT IT HAD DIFFERENT FINANCIAL YEAR END WITHOUT APPRECIATING THE FACT THAT THE FINANCIAL RE SULTS DISPLAYED WERE FOR A PERIOD OF 12 MONTHS. 4.7. THAT THE LEARNED TPO ERRED ON FACTS AND IN L AW IN APPLYING LOWER TURNOVER FILTER OF INR 5 CRORE TO REJECT CERTAIN COMPANIES OTHERWISE COMPARABLE FOR THE INTERNATIONAL TRANSACTION PERTAINING TO PROVISION O F IT ENABLED SERVICES. WITHOUT PREJUDICE THE LEARNED TP O ERRED ON FACTS AND IN LAW IN NOT APPLYING AN UPPER TURNOVER FILTER. ITA NO.1508/DEL/2015 4 4.8. THE LEARNED TPO HAS ERRED IN LAW AND ON FACT S AND IN LAW IN REJECTING CERTAIN COMPARABLE COMPANI ES IDENTIFIED BY THE APPELLANT USING 'EXPORT INCOME LE SS THAN 75 PERCENT OF TOTAL INCOME' AS A COMPARABILITY CRITERION. 4.9. THE LEARNED TPO HAS ERRED IN LAW AND ON FACT S AND IN LAW BY REJECTING CERTAIN COMPARABLE COMPANI ES IDENTIFIED BY THE APPELLANT ON ACCOUNT OF SHOWING DIMINISHING REVENUES TREND. 4.10. THAT THE LEARNED TPO ERRED ON FACTS AND IN L AW IN REJECTING CERTAIN COMPANIES SELECTED AS COMPARAB LE BY APPLYING EMPLOYEE COST FILTER OF 25 PERCENT OF T HE TOTAL COST. 4.11 THAT THE LEARNED TPO ERRED IN SELECTING ACCENT IA TECHNOLOGIES LIMITED INFOSYS BPO LIMITED TCS E- SERVE LIMITED TCS E-SERVE INTERNATIONAL LIMITED FORTUNE INFOTECH LIMITED E4E HEALTHCARE LIMITED AN D IGATE GLOBAL LIMITED AS COM PARABLES WITHOUT APPRECIATING THAT THESE COMPARABLES DID NOT SATISFY THE FUNCTIONAL ASSETS AND RISKS ('FAR') ANALYSIS TEST VIS-A- VIS THE APPELLANT IN RELATION TO THE INTERNATIONAL TRANSACTION PERTAINING TO PROVISION OF IT ENABLED SERVICES. 4.12. THAT THE LEARNED TPO ERRED IN SELECTING A FEW COMPANIES AS COMPARABLES WITHOUT APPRECIATING THAT THESE COMPANIES HAVE DISPLAYED EXCEPTIONAL PROFIT DURING THE RELEVANT FINANCIAL YEAR (I.E. FY 2009-10 ) UNDER CONSIDERATION WHICH WAS ON ACCOUNT OF EXCEPTIONAL CIRCUMSTANCES AND DID NOT PORTRAY THE CORRECT OPERATIONAL PROFITABILITY IN THE INDUSTRY. 4.13. THAT THE HON'BLE DRP ERRED ON FACTS AND IN LAW IN NOT CONSIDERING SAT YAM BPO LIMITED R SYSTEMS INTERNATIONAL LIMITED (BPO SEGMENT) DATAMATICS FINANCIAL SERVICES LIMITED AND AXIS IT&T LIMITED APPEARING AS COMPARABLE COMPANIES FOR PROVISION OF IT ENABLED SERVICES. ITA NO.1508/DEL/2015 5 4.14. THAT THE LEARNED TPO ERRED ON FACTS AND IN L AW BY NOT MAKING APPROPRIATE ADJUSTMENT FOR RISK DIFFERENCES BETWEEN THE APPELLANT AND THE SELECTED COMPARABLE COMPANIES IN THE ARM'S LENGTH PRICE SO DETERMINED FOR THE INTERNATIONAL TRANSACTION PERTAI NING TO PROVISION OF IT ENABLED SERVICES AS THE APPELLA NT IS REMUNERATED ON COST PLUS BASIS FOR IMPUGNED TRANSACTIONS AND BEARS MINIMAL RISK. 4.15. THAT THE LEARNED TPO ERRED IN NOT ALLOWING TH E BENEFIT OF DOWNWARD ADJUSTMENT OF 5% AS PROVIDED I N THE PROVISO TO SECTION 92C OF THE ACT FROM THE ARM 'S LENGTH PRICE DETERMINED FOR THE IMPUGNED TRANSACTIO N. 5. THE LEARNED AO/ DRP HAVE ERRED IN LAW AND ON FACTS AND CIRCUMSTANCES OF THE CASE IN MAKING ADDI TION/ DISALLOWANCE AMOUNTING TO INR 201 379 ON ACCOUNT OF WRITE-OFF TDS RECOVERABLE FROM VENDORS. 6. THE LEARNED AO/ DRP HAVE ERRED IN LAW AND ON FACTS AND CIRCUMSTANCES OF THE CASE IN MAKING ADDI TION/ DISALLOWANCE AMOUNTING TO INR 355 979 BEING WRITE-O FF OF PROVIDENT FUND RECOVERABLE FROM VENDORS. 7. THE LEARNED AO/ DRP HAVE ERRED IN LAW AND ON FACTS AND CIRCUMSTANCES OF THE CASE BY TREATING SU CH WRITE-OFFS (TDS RECOVERABLE AND PF RECOVERABLE WRIT E- OFFS) AS BAD DEBTS WITHOUT APPRECIATING THE FACT TH AT SUCH WRITE-OFFS ARE ALLOWED AS A DEDUCTIBLE EXPENSE UNDER SECTION 37(1) OF THE ACT. 8. THE LEARNED AO / DRP HAVE ERRED ON FACTS ON THE CIRCUMSTANCES OF THE CASE AND IN LAW BY ALLEGIN G THAT THE ASSESSEE HAS FURNISHED INACCURATE PARTICUL ARS OF INCOME THEREBY PROPOSING TO INITIATE PENALTY PROCEEDINGS UNDER SECTION 271 (1 )(C) OF THE ACT. 9. THE LEARNED AO ERRED ON FACTS AND IN LAW BY PROPOSING TO LEVY CONSEQUENTIAL INTEREST UNDER SECT ION 234A AND 234BOF THE ACT MECHANICALLY AND WITHOUT RECORDING ANY SATISFACTION FOR ITS INITIATION. ITA NO.1508/DEL/2015 6 2. BRIEFLY STATED THE FACTS NECESSARY FOR ADJUDICAT ION OF THE CONTROVERSY AT HAND ARE : M/S. VERTEX CUSTOMER SERV ICES INDIA PVT. LTD. THE TAXPAYER IS A WHOLLY OWNED SUBSIDIARY OF VERTEX INDIA LIMITED UK ENGAGED IN THE PROVISION OF SERVICES IN THE FIELD OF CUSTOMER RELATIONSHIP MANAGEMENT MANAGING CALL-CEN TRE AND IT ENABLED SERVICES (ITES). THE TAXPAYER IS PROVIDING SERVICES TO THE VERTEX GROUP COMPANIES UNDER VARIOUS SUB-CONTRACTUA L ARRANGEMENTS AND CAN BE CHARACTERIZED AS A BPO AND ITES PROVIDER TO ITS ASSOCIATED ENTERPRISES (AE) AND A L ESS COMPLEX ENTITY AS IT PERFORMS FUNCTIONS AND ASSUMES RISKS T HAT ARE LESS EXTENSIVE AS COMPARED TO THE AE. THE TAXPAYER IS S ELECTED AS A TESTED PARTY FOR THE ECONOMIC ANALYSIS. THE TAXPAY ER ENTERED INTO INTERNATIONAL TRANSACTIONS DURING THE YEAR UNDER AS SESSMENT AS UNDER :- S. NO. NATURE OF INTERNATIONAL TRANSACTION AMOUNT (IN INR) METHOD SELECTED PLI VERTEX INDIAS OP/OC COMPARABLES PLI (OP/TC) 1 PROVISION OF IT ENABLED SERVICES 55 80 30 040 TNMM OPERATING PROFIT / COST (OP/TC) 18.94% 14.27% 2 RECEIPT OF CALL CENTRE SUPPORT SERVICES 23 906 114 TNMM 3 REIMBURSEMENT OF EXPENSES 13 78 681 COMPARABLE UNCONTROLLED PRICE METHOD 3. THE TAXPAYER IN ORDER TO BENCHMARK ITS INTERNATI ONAL TRANSACTIONS ADOPTED TRANSACTIONAL NET MARGIN METHO D (TNMM) ITA NO.1508/DEL/2015 7 AS MOST APPROPRIATE METHOD (MAM) BASED ON OPERATING PROFIT / TOTAL COST (OP/TC) AS THE PROFIT LEVEL INDICATOR (P LI) SELECTED 15 COMPARABLES WITH AN AVERAGE MARGIN OF 14.27% USING MULTIYEAR DATA WHICH HAS BEEN COMPARED WITH MARGIN OF 13.28% (A NCP MARK UP) OF COMPARABLE COMPANIES AND HAVE FOUND ITS INTERNATIONAL TRANSACTIONS AT ARMS LENGTH. 4. THE LD. TPO AFTER APPLYING VARIOUS FILTERS LIKE USING CURRENT YEARS DATA BY THE COMPANY FOR THE SAME FINANCIAL Y EAR REJECTED COMPANIES HAVING TURNOVER LESS THAN RS.5 CRORES; SE LECTING COMPANIES HAVING RATIO OF SERVICE INCOME TO THE TOT AL INCOME AT LEAST 75%; SELECTING COMPANIES HAVING INCOME FROM E XPORTS AT LEAST 75% OF THE TOTAL INCOME; REJECTING COMPANIES HAVING RELATED PARTY TRANSACTIONS EXCEEDING 25% OF THE SALES; COMP ANIES WITH EMPLOYEE COST THAT IS LESS THAN 25% OF THE COST; CO MPANIES THAT ARE EFFECTED BY SOME PECULIAR ECONOMIC CIRCUMSTANCES. FINALLY THE TPO HAS SELECTED 11 COMPARABLES HAVING AVERAGE MEAN MARGIN AT 37.90% ARRIVED AT THE ADJUSTED OP/TC AND CONSEQUENT LY PROPOSED ARMS LENGTH PRICE OF INTERNATIONAL TRANSACTION AT RS.72 87 99 012/- AS AGAINST RS.59 79 94 514/- DETERMINED BY THE TAXP AYER. 5. THE TAXPAYER CARRIED THE MATTER BY WAY OF RAISIN G OBJECTIONS BEFORE THE LD. DRP WHICH HAVE BEEN DISPOSED OFF. FEELING ITA NO.1508/DEL/2015 8 AGGRIEVED THE TAXPAYER HAS COME UP BEFORE THE TRIB UNAL BY WAY OF FILING THE PRESENT APPEAL. 6. WE HAVE HEARD THE LD. AUTHORIZED REPRESENTATIVES OF THE PARTIES TO THE APPEAL GONE THROUGH THE DOCUMENTS R ELIED UPON AND ORDERS PASSED BY THE REVENUE AUTHORITIES BELOW IN T HE LIGHT OF THE FACTS AND CIRCUMSTANCES OF THE CASE. GROUNDS NO.1 2 3 4 & 4.1 7. GROUNDS NO. 1 2 3 4 & 4.1ARE GENERAL IN NATUR E AND DO NOT REQUIRE ANY ADJUDICATION. GROUNDS NO.4.2 TO 4.15 8. TPO AFTER CONDUCTING A THOROUGH ECONOMIC ANALYS IS IN THE LIGHT OF THE OBJECTIONS RAISED BY THE TAXPAYER FOR EXCLUSION AND INCLUSION OF CERTAIN COMPARABLES FINALLY SELECTED 1 1 COMPARABLES AS UNDER :- S.NO. COMPANY NAME ADJUSTED OP/TC (%) 1 ACCENTIA TECHNOLOGIES LTD. 49.39 2 COSMIC GLOBAL LTD. 29.49 3 E4E HEALTHCARE 40.75 4 FORTUNE INFOTECH LIMITED 30.57 5 I - GATE GLOBAL LTD. 33.29 6 INFOSYS BPO LTD. 39.36 7 JINDAL INTELLICOM LTD. 24.14 8 MICROLAND LTD. 6.91 9 OMEGA HEALTHCARE 23.93 10 TCS E-SERVE INTERNATIONAL LTD. 64.62 11 TCS E - SERVE LTD. 74.46 AVERAGE 37.90 ITA NO.1508/DEL/2015 9 9. ON THE BASIS OF AVERAGE OF 37.90% OF THE COMPARA BLES AS AGAINST MEAN MARGIN OF THE TAXPAYER AT 13.28% (A NC P MARK UP) TPO PROCEEDED TO COMPUTE THE ARMS LENGTH PRICE (AL P) OF INTERNATIONAL TRANSACTION QUA PROVISION FOR ITES AS UNDER :- OPERATING COST (A) 52 84 94 432 OP/TC 37.90% MARGIN (B) 20 03 04 580 ARMS LENGTH PRICE (A+B)=C 72 87 99 012 PRICE CHARGED BY THE ASSESSEE (D) 59 79 94 514 DIFFERENCE (C-D) 13 39 13 147 ADJUSTMENT PROPOSED 13 08 04 498 THE ARMS LENGTH PRICE OF THE INTERNATIONAL TRANSAC TION RELATED TO PROVISION OF IT ENABLED SERVICES IS DETERMINED AT RS.72 87 99 012 AS AGAINST RS.59 79 94 514 DETERMINED BY THE ASSESSEE. THE ASSESSING OFFICER SHALL ENHANCE THE INCOME OF THE ASSESSEE BY RS.13 08 04 498. 10. UNDISPUTEDLY THERE IS NO CHANGE IN THE BUSINES S MODEL OF THE TAXPAYER FROM THE EARLIER YEAR AS IS EVIDENT FR OM PAGE 2 OF THE TPO ORDER DURING THE YEAR UNDER ASSESSMENT. NOW T HE ONLY DISPUTE BEFORE THE BENCH IS QUA BENCHMARKING THE IN TERNATIONAL TRANSACTIONS RELATING TO PROVISION OF ITES TO THE T UNE OF RS.72 87 99 012/- AS AGAINST RS.59 79 94 514/- DETE RMINED BY THE TAXPAYER ON ACCOUNT OF TP ADJUSTMENT. 11. TNMM USED BY THE TAXPAYER AS MOST APPROPRIATE M ETHOD HAS BEEN ACCEPTED BY THE TPO. BEFORE LD. DRP THE TAXP AYER RAISED SPECIFIC GROUND THAT THE TAXPAYER HAS ALSO PROVIDED COMPARABLE ITA NO.1508/DEL/2015 10 SERVICES TO UNRELATED PARTIES AS SUCH THE MARGIN EA RNED IN THIS SEGMENT SHOULD BE COMPARED TO THE MARGIN EARNED IN THE RELATED PARTY SEGMENT. THE LD. DRP REJECTED THIS CONTENTIO N OF THE TAXPAYER ON THE GROUND THAT THE VOLUME OF TRANSACTI ON IN UNRELATED PARTY SEGMENT IS AROUND 6% OF THE TOTAL TURNOVER OF THE TAXPAYER AND THE NATURE OF SERVICES TO THE RELATED PARTY AND UNRELATED PARTY MAY BE DIFFERENT. 12. HOWEVER THE LD. AR FOR THE TAXPAYER WITHOUT PR EJUDICE TO THIS GROUND RAISED BEFORE LD. DRP PROCEEDED TO ARGU E FOR EXCLUSION OF ACCENTIA TECHNOLOGIES LIMITED COSMIC GLOBAL LIM ITED IGATE GLOBAL SOLUTIONS LIMITED INFOSYS BPO LIMITED TCS E-SERVE INTERNATIONAL LIMITED AND TCS E-SERVE LIMITED AND F OR INCLUSION OF ASIA IT&T LIMITED DATAMATICS FINANCIAL SERVICES LIMITED SATYAM BPO LIMITED AND R SYSTEMS INTERNATIONAL LIMI TED (BPO SEGMENT) FOR BENCHMARKING THE INTERNATIONAL TRANSAC TIONS ONE BY ONE AS UNDER. ACCENTIA TECHNOLOGIES LTD. (ACCENTIA) 13. THE TAXPAYER SOUGHT TO EXCLUDE ACCENTIA ON GROU NDS OF FUNCTIONAL DISSIMILARITY; THAT ACCENTIA HAS UNDERGO NE EXTRA ORDINARY ACTIVITIES DURING THE YEAR UNDER ASSESSMENT AND HAS EARNED SUPER NORMAL PROFIT. HOWEVER LD. TPO REJECTED THE OBJEC TIONS RAISED BY ITA NO.1508/DEL/2015 11 THE TAXPAYER ON THE GROUND THAT THE TAXPAYER HAS FA ILED TO POINT OUT HOW ACQUISITION EFFECTED THE OPERATION OF THE COMPA NY AND IT HAS NO SIGNIFICANT INFLUENCE FROM COMPARISON OF MARGIN OF FY 2008-09 AND 2009-10. TPO FURTHER REJECTED THE OBJECTIONS R AISED BY THE TAXPAYER FOR EXCLUSION OF ACCENTIA ON THE GROUND TH AT UNDER TNMM PARAMETER OF COMPARABILITY ARE RELATIVELY RELA XED AND RATIO OF INTANGIBLES TO TURNOVER IS MERE 5% HAVING NO IMP ACT ON PROFITABILITY OF THE COMPANY. SIMILAR OBJECTIONS H AVE BEEN RAISED BY THE TAXPAYER BEFORE LD. DRP WHO HAS APPROVED THE DECISION OF TPO. 14. FIRST OF ALL TO PURSUE THE EXTRA ORDINARY CIRC UMSTANCES ON ACCOUNT OF AMALGAMATION THE LD. AR FOR THE TAXPAYE R TAKEN US TO ANNUAL REPORT OF ACCENTIA FOR FY 2009-10. FROM PAG E 94 OF THE ANNUAL REPORT IT IS APPARENTLY CLEAR THAT SCHEME O F AMALGAMATION OF ERSTWHILE ASSCENT INFOSERVE PVT. LTD. WITH THE TAXP AYER HAS BEEN SANCTIONED BY THE HONBLE HIGH COURT OF JUDICATURE AT MUMBAI BY ORDER DATED 21.08.2009 AND HONBLE HIGH COURT OF KA RNATAKA VIDE ORDER DATED 06.02.2010 AND ALL THE ASSETS AND LIABI LITIES OF THE ERSTWHILE COMPANY WAS TRANSFERRED AND VESTED IN THE COMPANY. 15. THE TAXPAYER HAS ALSO MADE INVESTMENT IN THE FO REIGN ENTITIES BY PURCHASING 13% STAKE IN TRANS SERVICE INC. MAKIN G TOTAL ITA NO.1508/DEL/2015 12 INVESTMENT OF 23% DURING THE RELEVANT YEAR. ACCENTI A HAS INVESTED US$ 1.5 MILLION FOR 260 EQUITY SHARES OF TRANS SERV ICE INC.. 16. THE LD. AR FOR THE TAXPAYER ALSO SOUGHT EXCLUSI ON OF ACCENTIA ON ACCOUNT OF FUNCTIONAL DISSIMILARITY AS ACCENTIA IS INTO PROVIDING THE ENTIRE GAMUT OF SERVICES UNDER HEALTH CARE RECEIVABLES CYCLE MANAGEMENT VIZ. MEDICAL TRANSCRI PTION MEDICAL CODING AND BILLING AND RECEIVABLES MANAGEME NT SERVICES TO DIFFERENT CLIENTS; IN SOME CASES SEPAR ATELY AND IN SOME CASES ALL THE THREE DIFFERENT SERVICES ARE OFFERED TO THE SAME CLIENT. THE DELIVERY OF THESE SERVICES IS USING THIRD PARTY SOFTWARE IN MOST CASES AND IN SOME CASES USING PROPRIETARY SOFTWARE . 17. LD. AR FOR THE TAXPAYER ALSO POINTED OUT THAT T HE ACCENTIA HAS SIGNIFICANT GOODWILL AND INTANGIBLE SUFFICIENT TO IMPACT PROFITABILITY VIS--VIS THE TAXPAYER WHICH IS A RIS K INSULATED CONTRACT SERVICE PROVIDER. 18. PERUSAL OF ANNUAL REPORT AVAILABLE AT PAGE 88 OF THE PAPER BOOK VOL.I WHICH IS SCHEDULE AND FORMS PART OF THE BALANCE SHEET SHOWS HUGE INTANGIBLE BRANDS AND GOODWILL APPROXIMA TELY OF 57% OF THE FIXED ASSETS. FURTHER FROM THE PERUSAL OF S UBMISSIONS MADE BY THE TAXPAYER BEFORE TPO AVAILABLE AT PAGE 232 T O 241 OF THE PAPER BOOK RELEVANT PAGE 238 THE TAXPAYER RAISED SPECIFIC ITA NO.1508/DEL/2015 13 OBJECTION AS TO NON-AVAILABILITY OF THE SEGMENTAL I NFORMATION. HOWEVER TPO HAS NOT CONTROVERTED THIS FACT WHILE E XAMINING THE SUITABILITY OF THIS COMPARABLE. 19. SUITABILITY OF ACCENTIA AS A COMPARABLE COMPANY INTO ITES LIKE TAXPAYER HAS BEEN EXAMINED BY THE COORDINATE B ENCH OF THE TRIBUNAL IN EQUANT SOLUTIONS INDIA PVT. LTD. VS. DCIT IN ITA NO.1202/DEL/2015 FOR AY 2010-11 AVAILABLE AT PAGES 207 TO 237 OF THE PAPER BOOK OF CASE LAWS. COORDINATE BENCH O F THE TRIBUNAL IN EQUANT SOLUTIONS INDIA PVT. LTD. (SUPRA) ORDERED TO EXCLUDE ACCENTIA FROM THE LIST OF COMPARABLES BY FOLLOWING THE ORDER OF HYDERABAD BENCH OF THE TRIBUNAL IN EXCELLENCE DATA RESEARCH PVT. LTD. HYDERABAD VS. ITO WARD 2 (1) HYDERABAD IN ITA NO.159/HYD./2014 DATED 31.07.2014 BY RETURNING FOLLOWING FINDINGS :- C. WE HAVE CONSIDERED THE RIVAL CONTENTION. DURIN G THE YEAR THIS COMPARABLE HAS BEEN GONE INTO SUBSTAN TIAL BUSINESS RESTRUCTURING RESULTING INTO EXTRAORDINARY CIRCUMSTANCES DURING THE FY 2009-10 SUBSIDIARY OF ASCENTIA GOT AMALGAMATED WITH THIS COMPANY AND THE FIGURES OF THE BUSINESS RESULTS FOR THE YEAR ENDING 31ST MARCH 2010. IN THIS CASE ALSO EXCLUDED THE FIGURES OF AMALGAMATED COMPANY AND DUE TO WHICH THE COMPARABLE HAS HIGH OP BY TC MARGIN. THE RELEVANT OBSERVATIONS OF THE TRIBUNAL AS RECORDED IN PARA 19 .2 OF THE ORDER PASSED IN THE CASE OF EXCELLENCE DATA RESEARCH PVT. LTD. HYDERABAD V. ITO WARD 2(1) HYDERABAD (ITA NO. 159/HYD/2014 DATED 31.7.2014); BEING RELEVANT IN THIS CASE ARE REPRODUCED BELOW- ITA NO.1508/DEL/2015 14 '19.2 WE HAVE CONSIDERED THE RIVAL CONTENTIONS AND NOTICED THAT THIS COMPANY OPERATES IN A DIFFERENT BUSINESS STRATEGY OF ACQUIRING COMPANIES FOR INORGANIC GROWTH AS ITS STRATEGY. IN EARLIER YEARS ON THE REASON OF ACQUISITION OF VARIOUS COMPANIES BEING AN EXTRAORDINARY EVENT WHICH HAD AN IMPACT ON THE PROFIT THIS COMPANY WAS EXCLUDED. AS SUBMITTED BY THE LEARNED COUNSEL THIS YEAR ALSO THE ACQUISITION OF SOME COMPANIES BY THAT COMPANY MAY HAVE IMPACT ON THE PROFIT. CONSIDERING THE PROFIT MARGINS OF THE COMPANY AND INSUFFICIENT SEGMENTAL DATA WE ARE OF THE OPINION THAT THIS COMPANY CANNOT BE SELECTED AS A COMPARABLE. MOREOVER THIS IS ALSO NOT A COMPARABLE IN THE CASE OF M/S. MERCER CONSULTING (INDIA) P. LTD. (SUPRA) WHICH INDICATES THAT THE TPO THEREIN HAS EXCLUDED IT AT THE OUTSET. IN VIEW OF THIS WE DIRECT THE ASSESSIN G OFFICER/TPO TO EXCLUDE THIS COMPARABLE FROM THE LIST OF COMPARABLES SELECTED.' AS POINTED OUT BY THE LEARNED COUNSEL FOR THE ASSES SEE THERE WAS AMALGAMATION OF A COMPANY DURING THE RELEVANT YEAR AND THE SAID COMPANY THEREFORE CAN NOT BE CONSIDERED AS COMPARABLE DUE TO THIS EXTRAORDINA RY EVENT WHICH OCCURRED IN THE RELEVANT YEAR AS RIGHTL Y HELD BY THE TRIBUNAL INTER ALIA IN THE CASE OF EXCE LLENCE DATA RESEARCH P. LTD. (SUPRA). WE THEREFORE FOLLO W THE DECISION OF THE COORDINATE BENCH OF THIS TRIBUNAL I N THE CASE OF EXCELLENCE DATA RESEARCH SERVICES PVT. LTD. (SUPRA) AND DIRECT THE AO/TPO TO EXCLUDE THE ACCENT IA TECHNOLOGIES LIMITED FROM THE LIST OF COMPARABLES O N THIS GROUND. FURTHER THIS COMPANY ALSO PROVIDES KP O SERVICES LPO AND DPO BESIDES OFFERING SOFTWARE SERVICES. THEREFORE AS THIS ENROLLED IN KNOWLEDGE PROCESSING OUTSOURCING IT IS FUNCTIONALLY DISSIMILA R TO THE ASSESSEE. FURTHER IT DOES NOT CONTAIN SEGMENT WISE FUNCTIONAL RESULTS AND IN ABSENCE OF SUCH SEGMENTAL INFORMATION IT CANNOT BE USED FOR COMPARING THE PL I OF THE ASSESSEE. IT IS ALSO NOTED THAT IT IS ALSO HAVI NG SIGNIFICANT AMOUNT OF BRANDS INTELLECTUAL PROPERTY RIGHTS AND GOODWILL AS COMPARED TO THE ASSESSEE. THEREFORE IN VIEW OF THE ABOVE REASONS THIS COMPAN Y IS ITA NO.1508/DEL/2015 15 REQUIRED TO BE EXCLUDED. FURTHER RELYING ON THE DEC ISION OF JURISDICTIONAL HIGH COURT IN CASE OF RAMPGREEN SOLUTIONS PVT LTD (TS-387-HC-2015(DEL)-TP) WHERE IN IT IS HELD THAT KPO ARE ITES WHERE THE SERVICE PROVIDERS HAVE TO EMPLOY ADVANCED LEVEL OF SKILLS A ND KNOWLEDGE. THIS IS ABSENT IN THIS CASE OF ASSESSEE WHICH IS LOW END ITES SERVICE PROVIDER SUCH AS WHICH ENA BLES NETWORK MANAGEMENT AND OTHER BACK OFFICE SUPPORT SERVICES PERFORMED BY ASSESSEE WHICH PRIMARILY INCLUDE REMOTE MONITORING AND MAINTENANCE OF EQUANT GLOBAL NETWORK PLATFORMS AND SERVICES COORDINATION REMOTE CONFIGURATION AND IMPLEMENTATION OF QUALITY CUSTOMER NETWORKING SOLUTIONS. THEREFORE THIS COMPARABLE IS ORDERED F OR ITS EXCLUSION ACCORDINGLY. 20. ACCENTIA HAS BEEN EXCLUDED AS A COMPARABLE IN T AXPAYERS OWN CASE FOR AY 2009-10 ON GROUND OF HAVING BEEN EN GAGED IN DIFFERENT AND DIVERSIFIED BUSINESS BY FOLLOWING DEC ISION RENDERED BY THE COORDINATE BENCH OF THE TRIBUNAL IN ITA NO.1897/DEL/2014 FOR AY 2009-10 IN CASE OF XCHANGING TECHNOLOGIES SE RVICES INDIA PT. LTD. VS. DCIT DATED 24.04.2015 . 21. SO KEEPING IN VIEW THE FACTS DISCUSSED IN THE PRECEDING PARAS THAT ACCENTIA HAS UNDERGONE EXTRA ORDINARY EV ENTS ON ACCOUNT OF AMALGAMATION AND IT IS FUNCTIONALLY DISSIMILAR B EING INTO GAMUT OF SERVICES HAVING SIGNIFICANT INTANGIBLES AND IN T HE ABSENCE OF SEPARATE SEGMENTAL INFORMATION IT CANNOT BE A VALI D COMPARABLE TO THE TAXPAYER WHICH IS A ROUTINE RISK CAPTIVE SERVIC E PROVIDER TO ITS ITA NO.1508/DEL/2015 16 AE. SO WE ORDER TO EXCLUDE ACCENTIA FROM THE FINA L SET OF COMPARABLES. COSMIC GLOBAL LIMITED (COSMIC) 22. THE TAXPAYER SOUGHT TO EXCLUDE THIS COMPARABLE ON GROUND OF DIFFERENT BUSINESS MODEL AS THIS COMPANY OUTSOUR CED ITS SIGNIFICANT WORK TO OUTSIDE VENTURES AND AS SUCH I TS EMPLOYEE COST IS LESS THAN 21.30%. AS PER SCHEDULE TO THE BALANC E SHEET AVAILABLE AT PAGES 10 & 11 OF THE PAPER BOOK VOL.I REVENUE O F COSMIC FROM BPO ACTIVITIES IS RS.26 97 430/- WHICH MAKES I T INCOMPARABLE. 23. LD. DR FOR THE REVENUE CONTENDED THAT COSMIC IS INTO ITES ONLY BUT FAILED TO CONTROVERT THE FACT THAT MOST OF ITS WORK IS OUTSOURCED AS IS EVIDENT FROM ANNUAL REPORT. EVEN ITS REVENUE FROM BPO ACTIVITY IS NOT ENOUGH TO MAKE IT A COMPARABLE. COMPARABILITY OF COSMIC HAS BEEN EXAMINED BY THE COORDINATE BENCH OF THE TRIBUNAL IN COGNIZANT TECHNOLOGY SERVI CES P. LTD. VS. DCIT IN ITA NO.459/HYD./2015 DATED 29.01.2016 WHICH IS ALSO INTO THE BUSINESS OF ITES TO ITS AE LIKE THE T AXPAYER AND FOUND TO BE INCOMPARABLE BY FOLLOWING DECISION OF THE COO RDINATE BENCH OF THE TRIBUNAL RENDERED IN ACIT VS. HYUNDAI MOTORS INDIA ENGINEERING P. LTD. IN ITA NOS.1743 & 1917/HYD/2014 DATED ITA NO.1508/DEL/2015 17 13.11.2015 . IN COGNIZANT TECHNOLOGY SERVICES P. LTD. (SUPRA) COSMIC HAS BEEN EXCLUDED ON THE GROUND OF OUTSOURCI NG OF ITS MAIN ACTIVITY OUT OF WHICH EMPLOYEE COST IS LESS THAN 21 .30% AND MOST OF THE COST IS WITH REGARD TO THE OUTSOURCING CHARG ES FOR TRANSLATION CHARGES. SO FOLLOWING THE DECISION RENDERED BY TH E COORDINATE BENCH AND KEEPING IN VIEW THE FACT THAT COSMIC HAS DIFFERENT BUSINESS MODEL WE ORDER TO EXCLUDE COSMIC FROM THE FINAL SET OF COMPARABLES. FORTUNE INFOTECH LIMITED (FORTUNE) 24. THE TAXPAYER SOUGHT TO EXCLUDE FORTUNE FROM THE LIST OF COMPARABLE FOR BENCHMARKING THE INTERNATIONAL TRANS ACTIONS FOR TWO REASONS : ONE IT IS FUNCTIONALLY DIFFERENT; TWO D UE TO PECULIAR ECONOMIC CIRCUMSTANCES. LD. AR ALSO RELIED UPON EQUANT SOLUTIONS INDIA PVT. LTD. (SUPRA). 25. PERUSAL OF THE SCREENSHOT OF THE WEBSITE OF THE FORTUNE RELIED UPON BY THE TAXPAYER AVAILABLE AT PAGE 243OF THE P APER BOOK SHOWS THAT FORTUNE IS INTO WEB APPLICATION DEVELOPM ENT INCLUDING MOBILE APPLICATIONS ECOMMERCE APPLICATIONS AND SEO SERVICES DEVELOPING CMS BASED WEBSITE USING DRUPAL JOOMLA WORDPRESS ECOMMERCE MAGENTO ETC. OFFERING ONSITE AND OFFSITE SERVICES TO ITA NO.1508/DEL/2015 18 VARIOUS CLIENTS AND ALSO INTO WEB DESIGNING SERVICE S WHEREAS THE TAXPAYER IS INTO PROVIDING ROUTINE ITES TO ITS AE. 26. THE TAXPAYER ALSO BROUGHT ON RECORD THE PECULIA R ECONOMIC CIRCUMSTANCES SHOWING ITS DIMINISHING REVENUE TO 54 .52% AS COMPARED TO FY 2008-09. THIS FACT IS EVIDENT FROM ANNUAL REPORT RELIED UPON RELEVANT PAGE 127 OF THE PAPER BOOK VO L.I. 27. HOWEVER ON THE OTHER HAND LD. DR CONTENDED TH AT THE ENTIRE REVENUE OF FORTUNE IS FROM ITES AND FOR PROVIDING I TES SOME SOFTWARE REQUIRES TO BE USED AND BALANCE SHEET AVAI LABLE AT PAGE 131 OF THE PAPER BOOK DOES NOT SHOW ANY INTANGIBLE. HOWEVER THERE IS NO MATERIAL ON RECORD TO CONTROVERT THE FU NCTIONAL DISSIMILARITY HIGHLIGHTED BY THE SCREENSHOT OF THE WEBSITE OF THE COMPANY AVAILABLE AT PAGE 243. 28. MORE SO COMPARABILITY OF FORTUNE HAS BEEN EXAM INED BY THE COORDINATE BENCH OF THE TRIBUNAL IN EQUANT SOLUTIONS INDIA PVT. LTD. (SUPRA) AVAILABLE AT PAGES 207 TO 237 OF THE PAPER BOOK RELEVANT PAGE 230 AND FOUND TO BE INCOMPARABLE WIT H EQUANT SOLUTIONS INDIA PVT. LTD. (SUPRA) WHICH IS ALSO INTO PROVIDING ITES BY RELYING UPON THE DECISION RENDERED BY THE T RIBUNAL IN CASE OF 24/7 CUSTOMER.COM (P.) LTD. ON THE GROUND THAT THIS COMPANY HAS DEVELOPED ITS OWN SOFTWARE CALLED FINETRAN AN D IMAGE ITA NO.1508/DEL/2015 19 INDEX FOR PERFORMING SPECIALIZED SERVICES IN MEDIC AL TRANSCRIPTION AND PATIENT RECORD MANAGEMENT. 29. MOREOVER DUE TO PECULIAR ECONOMIC CIRCUMSTANCE S FORTUNE IS ALSO INCOMPARABLE WITH THE TAXPAYER. SO IN VIE W OF THE AFORESAID FACTS AND CIRCUMSTANCES AND BY FOLLOWING THE DECISION RENDERED BY THE COORDINATE BENCH OF THE TRIBUNAL IN EQUANT SOLUTIONS INDIA PVT. LTD. (SUPRA) WE ORDER TO EXCLUDE FORTUNE FROM THE FINAL SET OF COMPARABLES. IGATE GLOBAL SOLUTIONS LIMITED (IGATE) 30. THE TAXPAYER SOUGHT TO EXCLUDE IGATE FOR BENCHM ARKING THE INTERNATIONAL TRANSACTION ON GROUNDS OF FUNCTIO NAL DISSIMILARITY INSUFFICIENT SEGMENTAL INFORMATION HIGH TURNOVER A ND EXCEPTIONAL YEAR OF OPERATION WHICH HAS IMPACTED THE PROFITABIL ITY. 31. THE LD. DR FOR THE REVENUE BY RELYING UPON THE ORDER OF TPO CONTENDED THAT IT IS A CASE OF ACQUISITION AND NOT AMALGAMATION AND IS NOT GOING TO IMPACT PLI. BUT THE LD. AR FOR THE TAXPAYER CONTROVERTED THIS ARGUMENT OF THE LD. DR BY RELYING UPON THE ANNUAL REPORT OF IGATE AVAILABLE AT PAGE 192 OF THE PAPER BOOK VOL.I WHEREIN FACTUM OF AMALGAMATION HA S BEEN CATEGORICALLY EXPLAINED HAVING BEEN CARRIED OUT AS PER ORDER DATED ITA NO.1508/DEL/2015 20 24.02.2010 PASSED BY HONBLE HIGH COURT OF KARNATAK A. THE LD. AR FOR THE TAXPAYER ALSO RELIED UPON THE CASES OF T HE COORDINATE BENCH OF THE TRIBUNAL IN AMERIPRISE INDIA PVT. LTD. VS. DCIT IN ITA NO.7014/DEL/2014 ORDER DATED19.01.2016 AND UNIT ED HEALTH GROUP INFORMATION SERVICES (P.) LTD. VS. DCIT ORDER DATED 26.08.2016 . 32. PERUSAL OF THE ANNUAL REPORT OF IGATE AVAILABL E AT PAGES 192 AND 197 OF THE PAPER BOOK VOL.I SHOWS THAT IGA TE IS ENGAGED INTO PROVIDING IT AND ITES WHEREAS NO SEGMENTAL INF ORMATION IS AVAILABLE IN ITS ANNUAL REPORT. SO THIS SOLE REAS ON MAKES FORTUNE INCOMPARABLE WITH TAXPAYER WHICH IS A ROUTINE ITES PROVIDER. 33. MOREOVER IGATE HAS UNDERGONE RESTRUCTURING BY WAY OF AMALGAMATION AS HAS BEEN DISCUSSED IN PRECEDING PAR AS IGATE IS ALSO HAVING HUGE TURNOVER OF RS.932.18 CRORES AS AG AINST TURNOVER OF THE TAXPAYER FROM THE RELEVANT SEGMENT AT RS.76. 91 CRORES WHICH IS 12 TIMES OF THE TURNOVER OF THE TAXPAYER AS IS E VIDENT FROM ANNUAL REPORT AVAILABLE AT PAGE 183 OF THE PAPER BOOK VOL. I. 34. IN VIEW OF WHAT HAS BEEN DISCUSSED ABOVE WE AR E OF THE CONSIDERED VIEW THAT IGATE IS NOT A SUITABLE COMPAR ABLE FOR BENCHMARKING THE INTERNATIONAL TRANSACTIONS HENCE ORDERED TO BE EXCLUDED FROM THE FINAL SET OF COMPARABLES. ITA NO.1508/DEL/2015 21 INFOSYS BPO LIMITED (INFOSYS BPO) 35. THE TAXPAYER SOUGHT TO EXCLUDE INFOSYS BPO FROM THE FINAL SET OF COMPARABLES ON GROUNDS OF DIFFERENT AND DIVE RSIFYING FUNCTIONS HIGH TURNOVER HIGH BRAND VALUE AND HAV ING EXCEPTIONAL YEAR OF OPERATION. INFOSYS BPO WAS ORDERED TO BE E XCLUDED AS COMPARABLE IN TAXPAYERS OWN CASE FOR AY 2009-10. 36. LD. DR RELIED UPON THE ORDER PASSED BY TPO. 37. KEEPING IN VIEW THE FACT THAT INFOSYS BPO IS IN TO DIFFERENT AND DIVERSIFYING SERVICES LIKE CUSTOMER SERVICE OUT SOURCING FINANCE AND ACCOUNTING KNOWLEDGE SERVICES HUMAN R ESOURCE OUTSOURCING LEGAL PROCESS OUTSOURCING SALES AND F ULFILLMENT SOURCING AND PROCUREMENT OUTSOURCING BANKING AND C APITAL OUTSOURCING MEDIA OUTSOURCING ENERGY OUTSOURCING RETAIL ETC. AS AGAINST TAXPAYER COMPANY WHICH IS INTO ROUTINE ITES . IT CANNOT BE A SUITABLE COMPARABLE. 38. MOREOVER INFOSYS BPO IS HAVING HUGE TURNOVER OF RS.1126.63 CRORES AND HAS GOODWILL OF RS.19.3 CRORE S AS PER ANNUAL REPORT AVAILABLE AT PAGES 249 & 330 OF THE PAPER B OOK. INFOSYS IS ALSO INCURRING SELLING AND MARKETING EXPENSES TO TH E TUNE OF 6.96% TO ENHANCE ITS BUSINESS. MOREOVER INFOSYS BPO IS H AVING ITA NO.1508/DEL/2015 22 EXCEPTION YEAR OF OPERATION DUE TO ACQUISITION OF M CCAMISH SYSTEMS LLC TO PROVIDE END TO END SERVICES. 39. MORE SO INFOSYS BPO HAS BEEN ORDERED TO BE EXC LUDED AS A COMPARABLE IN TAXPAYERS OWN CASE FOR AY 2009-10 ORDER DATED 22.04.2016 ON THE GROUND THAT KPO COMPANY CANNOT BE COMPARED WITH BPO COMPANY AS HAS BEEN HELD BY HONBLE HIGH C OURT IN THE CASE OF RAMPGREEN SOLUTIONS PVT. LTD. VS. CIT 60 TAXMANN. COM 355 . SINCE THE TAXPAYER IS INTO ITES AND IS A KPO SO CANNOT BE COMPARED WITH INFOSYS BPO WHICH IS A BPO. CONSEQUE NTLY WE ORDER TO EXCLUDE INFOSYS BPO FROM THE FINAL SET OF COMPARABLES. TCS ESERVE INTERNATIONAL LTD. AND TCS ESERVE LTD. 40. THE TAXPAYER SOUGHT TO EXCLUDE TCS ESERVE INTER NATIONAL LTD. AND TCS ESERVE LTD. (FOR SHORT TCS INTL. AND TCS) ON THE GROUND OF PECULIAR ECONOMIC CIRCUMSTANCES FILTER A BNORMAL GROWTH NON-COMPARABLE SERVICES AND INSUFFICIENT SE GMENTAL DATA. LD. AR CONTENDED THAT TCS HAS BEEN ORDERED TO BE EX CLUDED IN AMERIPRISE INDIA PVT. LTD. (SUPRA) WHICH HAS BEEN AFFIRMED BY THE HONBLE HIGH COURT. 41. HOWEVER ON THE OTHER HAND LD. DR FOR THE REVE NUE CONTENDED THAT SINCE MAIN FUNCTION OF TCS INTL. A ND TCS IS ITA NO.1508/DEL/2015 23 ITES AND VERIFICATION OF VALIDATION IS DONE AT THE LAST STAGE AND BRAND IS NOT IMPACTING THE PLI IT IS A VALID COMPA RABLE. 42. HOWEVER PERUSAL OF THE BACKGROUND AND PRINCIPA L ACTIVITIES OF THE TCS INTL. AND TCS GIVEN IN ANNUAL REPORT AVAILABLE AT PAGE 413 SHOWS THAT THE COMPANYS OPERATION IS BRO ADLY COMPRISE OF TRANSACTION PROCESSING AND TECHNICAL SERVICES. TRANSACTION PROCESSING INCLUDES THE BROAD SPECTRUM OF ACTIVITIE S INVOLVING THE PROCESSING COLLECTIONS CUSTOMER CARE AND PAYMENTS IN RELATION TO THE SERVICES OFFERED BY CITIGROUP TO ITS CORPORATE AND RETAIL CLIENTS. TECHNICAL SERVICES INVOLVE SOFTWARE TESTING VERIFI CATION AND VALIDATION OF SOFTWARE AT THE TIME OF IMPLEMENTATIO N AND DATA CENTRE MANAGEMENT ACTIVITIES WHEREAS FOR ALL THE DI VERSIFYING SERVICES NO BREAK UP IS GIVEN. SO IN THE ABSENCE OF COMPLETE SEGMENTAL DATA TCS CANNOT BE TREATED AS ITES. MOR EOVER ABNORMAL GROWTH IN OPERATING INCOME OF 174% AND OPE RATING PROFIT OF 355% AS IS EVIDENT FROM PAGE 389 OF THE ANNUAL R EPORT PAPER BOOK VOL.I MAKES IT INCOMPARABLE WITH THE TAXPAYER WHICH IS A ROUTINE ITES PROVIDER HAVING TURNOVER OF RS.76.91 C RORES. SO IN THE ABSENCE OF INCOMPLETE SEGMENTAL DATA PECULIAR CIRCUMSTANCES AND NORMAL GROWTH WE ARE OF THE CONSIDERED VIEW TH AT TCS ESERVE INTERNATIONAL LTD. AND TCS ESERVE LTD. ARE NOT A VA LID COMPARABLE. ITA NO.1508/DEL/2015 24 43. COMPARABILITY OF TCS INTL. AND TCS HAS BEEN EXAMINED BY THE TRIBUNAL IN AMERIPRISE INDIA PVT. LTD. (SUPRA) AND HAS BEEN ORDERED TO BE EXCLUDED AS COMPARABLE WITH AMERIPRISE INDIA PVT. LTD. (SUPRA) WHICH WAS ALSO A ROUTINE ITES PROVIDER ON THE GROUND THAT TCS INTL. AND TCS IS ENGAGED IN RENDERING BPO SERVICES TO THE BANKING AND FINANCIAL SERVICES INDUSTRY AND TRA VEL TOURISM AND HOSPITALITY SUCH SERVICES INCLUDE TRANSACTION P ROCESSING AND TECHNICAL SERVICES. SINCE VERIFICATION OF VALIDATI ON IS PART OF THE SOFTWARE DEVELOPMENT THIS CANNOT BE TAKEN AS A VALI D COMPARABLE. SO WE ARE OF THE CONSIDERED VIEW THAT TCS ESERVE IN TERNATIONAL LTD. AND TCS ESERVE LTD. ARE NOT SUITABLE COMPARABL ES VIS--VIS THE TAXPAYER. COMPARABLES SOUGHT TO BE INCLUDED BY THE TAXPAYER 44. THE TAXPAYER INITIALLY SOUGHT TO INCLUDE FOUR C OMPARABLES VIZ. ASIA IT&T LIMITED DATAMATICS FINANCIAL SERVIC ES LIMITED SATYAM BPO LIMITED AND R SYSTEMS INTERNATIONAL LIMI TED (BPO SEGMENT) HOWEVER DURING THE COURSE OF ARGUMENT TH E LD. AR FOR THE TAXPAYER OPTED TO ARGUE FOR INCLUSION OF SATYAM BPO AND R. SYSTEMS REJECTED BY THE TPO/DRP FOR BENCHMARKING THE INTERNATIONAL TRANSACTIONS. ITA NO.1508/DEL/2015 25 SATYAM BPO LIMITED (SATYAM) 45. THE TAXPAYER CONTENDED THAT SATYAM IS FUNCTIONA LLY COMPARABLE BEING ENGAGED IN PROVIDING ITES AND BPO SERVICES IN THE NATURE OF BUSINESS PROCESSING MANAGEMENT TRANS ITIONING SERVICES AND CUSTOMER CONTRACT SERVICES. HOWEVER SATYAM WAS REJECTED BY DRP ON GROUND OF FRAUD WHICH TOOK PLACE IN SATYAM. FUNCTIONAL COMPARABILITY OF THE TAXPAYER VIS--VIS SATYAM IS NOT IN DISPUTE. 46. LD. AR FOR THE TAXPAYER RELIED UPON THE DECISIO N OF THE COORDINATE BENCH OF THE TRIBUNAL IN AMERICAN EXPRESS (INDIA) PVT. LTD. IN ITA NO.1868/DEL/2015 ORDER DATED 07.06 .2017 WHEREIN MAPPLE SOLUTIONS LTD. AND TRITON CORPORATIO N LTD. WAS EXCLUDED BY THE TPO ON GROUND OF SERIOUS INDICTMENT BEING PART OF THE RASTOGI GROUP BUT TRIBUNAL ORDERED TO RETAIN BO TH THE COMPARABLES BY EMPHASIZING THE FACT THAT BALANCE SH EET OF THE COMPANY IS DULY AUDITED BY THE AUDITOR AS PER STAND ARD APPROVED BY THE MINISTRY OF CORPORATE AFFAIRS. 47. HOWEVER WE ARE OF THE CONSIDERED VIEW THAT WE CANNOT COMPARE SCAM WHICH TOOK PLACE IN SATYAM BPO WITH MA PPLE SOLUTIONS LTD. AND TRITON CORP LTD. BECAUSE OF ITS MAGNITUDE AND BECAUSE OF THE FACT THAT NUMEROUS COMPANIES ARE AVA ILABLE TO BE TAKEN AS COMPARABLE IN TNMM. MOREOVER THE SCAM WHI CH TOOK ITA NO.1508/DEL/2015 26 PLACE IN SATYAM BPO IN 2008 WAS ALSO DETECTED DESPI TE THE FACT THAT ALL BALANCE SHEETS WERE AUDITED QUA THE PRECED ING YEARS AND WHEN THE CREDITABILITY OF A COMPANY DUE TO SUCH A B IG SCAM IS AT STAKE WE ARE OF THE CONSIDERED VIEW THAT THIS SATY AM BPO CANNOT BE TAKEN AS A VALID COMPARABLE FOR INCLUSION AS CON TENDED BY THE TAXPAYER. SO WE CONFIRM THE FINDINGS RETURNED BY T HE LD. TPO/DRP. R. SYSTEMS INTERNATIONAL LIMTIED (BPO SEGEMENT (R. SYSTEMS) 48. LD. DRP REJECTED THIS COMPANY ON THE GROUND THA T THE SAME WAS NOT TAKEN BEFORE TPO AND IT IS HAVING A DIFFERE NT FINANCIAL YEAR ENDING. 49. INCLUSION OF R. SYSTEMS WAS ALSO REJECTED BY TH E TPO IN UNITED HEALTH GROUP INFORMATION SERVICES (P) LTD. (SUPRA) ON GROUND OF DIFFERENT FINANCIAL YEAR ENDING. HOWEVER THE COORDINATE BENCH HELD THAT DIFFERENT FINANCIAL YEAR CANNOT BE THE SOLE REASON TO REJECT A COMPARABLE WHEN FUNCTIONAL SIMILARITY EXIS T. IN CASE THE TAXPAYER IS IN A POSITION TO PROVIDE RECONCILIATION OF THE PROFITABILITY WITH AUTHENTIC AND RELIABLE DATA RECO NCILIATION OF PROFITABILITY OF R. SYSTEMS VIS--VIS WITH THE TAXP AYER WITH AUTHENTIC AND RELIABLE DATA IT CAN BE RETAINED AS A COMPARABLE. SO FOLLOWING THE ORDER PASSED BY THE COORDINATE BENCH OF THE TRIBUNAL ITA NO.1508/DEL/2015 27 IN UNITED HEALTH GROUP INFORMATION SERVICES (P) LTD. (SUPRA) WE HEREBY SET ASIDE THIS COMPARABLE TO THE LD. TPO TO EXAMINE R. SYSTEMS AS COMPARABLE BY ALSO EXAMINING ITS FUNCTIO NAL COMPARABILITY. 50. IN VIEW OF WHAT HAS BEEN DISCUSSED ABOVE GROUN DS NO.4.2 TO 4.15 ARE PARTLY ALLOWED AND AO/TPO TO RECOMPUTE THE MARGIN ACCORDINGLY. CORPORATE GROUNDS GROUNDS NO.5 6 & 7 51. AO/DRP HAVE DISALLOWED AN AMOUNT OF RS.5 57 358 /- BEING WRITTEN OFF ADVANCE BY THE TAXPAYER ON ACCOUNT OF T DS RECOVERABLE FROM THE VENDORS AND AMOUNT RECOVERABLE IN RESPECT OF PROVIDENT FUNDS PAID BY THE TAXPAYER FOR ITS VENDORS. THE LD . AR FOR THE TAXPAYER CHALLENGING THE IMPUGNED DISALLOWANCE CONT ENDED THAT EXCESS DEDUCTION OF TDS AND AMOUNT RECOVERABLE IN R ESPECT OF PROVIDENT FUND BY THE TAXPAYER FROM ITS VENDORS WAS DUE TO MISTAKE COMMITTED IN THE REGULAR COURSE OF BUSINESS AND CLA IMED THE SAME AS TRADING LOSS. AO/DRP DISALLOWED THE SAME THAT T HE AMOUNT IS ACTUALLY RECOVERABLE FROM THE VENDORS BUT ENOUGH EF FORTS WERE NOT MADE BY THE TAXPAYER AND AS SUCH IT CANNOT BE TREA TED AS BUSINESS LOSSES. ITA NO.1508/DEL/2015 28 52. WE ARE OF THE CONSIDERED VIEW THAT THE DISALLOW ANCE MADE BY THE AO/DRP IS ALLOWABLE ON TWO GROUNDS : (I) WHE N THE SAME HAS BECOME BAD DEBTS AND WRITTEN OFF BY THE TAXPAYE R AND BOOKS OF ACCOUNT HAVE NOT BEEN CHALLENGED; AND (II) EVEN OTH ERWISE IT IS TRADING LOSSES SUFFERED BY THE TAXPAYER DUE TO BONA FIDE MISTAKE COMMITTED DURING THE REGULAR COURSE OF BUSINESS AND AS SUCH IS ALLOWABLE BUSINESS EXPENDITURE. SO GROUNDS NO.5 6 & 7 ARE DETERMINED IN FAVOUR OF THE TAXPAYER AND DISALLOWAN CE MADE BY THE AO/DRP STANDS DELETED. GROUND NO.8 53. GROUND NO.8 BEING PREMATURE NEEDS NO SPECIFIC F INDINGS. GROUND NO.9 54. GROUND NO.9 BEING CONSEQUENTIAL IN NATURE NEEDS NO SPECIFIC FINDINGS. 55. RESULTANTLY THE APPEAL OF THE ASSESSEE IS PART LY ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN OPEN COURT ON THIS 28 TH DAY OF NOVEMBER 2017. SD/- SD/- (N.K. SAINI) (KULDIP SINGH) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED THE 28 TH DAY OF NOVEMBER 2017 TS ITA NO.1508/DEL/2015 29 COPY FORWARDED TO: 1.APPELLANT 2.RESPONDENT 3.CIT 4.CIT (A) 5.CIT(ITAT) NEW DELHI. AR ITAT NEW DELHI.